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Dell moves away from build-your-own-PC

Posted Apr 03 2008, 04:18 PM by Kim Peterson
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Customization is a big business these days. Starbucks says it can customize 87,000 drink combinations for its patrons. Whether it be clothes, cars or gadgets, allowing customers to order a unique version is becoming a successful business model.

Not so for Dell, a company who made a name for itself on its build-your-own-PC policy. This week, the company said it will focus less on the build-to-order model and more on selling pre-built versions. The switch is part of the company's mission to bring down costs.

When it comes to computers, people don't need an extreme level of customization anymore, executives told analysts this week. Customers are giving up the luxury of picking their own computer features and opting for cheaper, pre-made PCs from other companies. Dell's share of the worldwide PC market has slipped to under 13% from 19% in 2006, and it has lost the title of top computer maker to Hewlett-Packard. Its growth has slowed to a trickle, while HP's 2007 growth could hit 30%.

Dell is now embracing the retail channel that has long been dominated by rivals, and has gone so far as to pull up stakes on the kiosks it installed at shopping malls. Give the company credit for trying to change with the times, although the change has been too slow so far.

Dell was also in the news today becuase it's going to have to cut more jobs than previously announced. It's fine to say you're going to cut 8,800 jobs, but don't go and hire for other positions if you want to reduce costs. That's exactly what Dell did.

So far, it has eliminated 5,500 of the 8,800 positions it announced last year. But it hired people in sales and customer support at the same time, so the net reduction has only been 3,200. The company won't say how many further job cuts it plans to make. Dell plans to close its desktop manufacturing plant in Austin, Tex., as part of the layoffs.

Dell also said it will buy back at least $1 billion in shares this quarter after repurchasing $4 billion last quarter. You'd think investors would be happy with all this news, but no: Dell shares rose less than 1% today to close at $20.12.

Dell aims to cut expenses by $3 billion a year by 2011. The computer maker is adopting a take-no-prisoners approach to cost-cutting this time around, execs told analysts.

"Every area of the company is being pursued," CEO Michael Dell said. He added that the "journey to transform the company" has begun, with major change taking place in five areas: notebooks, emerging countries, consumer, enterprise and small and medium businesses.

Analysts are responding well to Dell's plans. The company can be successful, wrote Citi analyst Richard Gardner, but it will struggle with soft demand for several more quarters until it sees savings in 2009 and 2010. And though Dell wants to cut costs, a Banc of America Securities analyst said that the company will have to spend money to grow in emerging markets and small businesses.

Comments

 

Not surprising, I have been building my own computers for couple of years to avoid problems with Dell not meeting my needs. Laptops were only thing I relied upon from Dell but last one was a disaster.

I think Dell should channel all their energy into Something! But I guess I'm just pissed because I'm going through hell with mine now. I guarentee that my next laptop WILL NOT be a Dell (unless it's a gift and even then I'll give the giver a middle finger behind their back). Customization (and price) were the things that attracted me to this company. Now if Dell is going to use the money they'll save to make their computers and accessories less shoddy, I'm all for it.

From a business standpoint, it probably does make more sense for Dell to focus less on the Custom Build process.   After all, this is what all of the other PC manufacturers do.

On the other hand, the customization process is what differentiates Dell from the Rest of the market.  However, Dell could simplify their online customization process a quite a bit.   For example, when I helped a friend order their last PC, they had 8 different options for memory: 3 Gig (667 MHZ), 4 Gig (667), or 3 Gig (800MHZ), 4 gig (800).   For techies, we understand the difference.  For people who just want to buy a PC and get going, this is mass confusion.  The price difference between the 667 and 800 MHZ memory?  20 dollars.  How about just offering the 800 MHZ exclusively?  It would reduce inventory cost, and most importantly, simplify the process for the consume.  Apple's custom build process just asks how much you want.   That's one of the reasons Apple is selling a lot more Mac's these days:  simplication.  

A friend of mine bought a Dell for home use. In her opinion the machine is junk. I have used a Dell laptop at work. In my opinion, that laptop is junk. The best laptop and desktop computers I have ever used were HP's. I won't shed a tear if Dell disappears from the market.

Dell is  still missing one of the main problems, there customer service turned to crap... you bought a dell because it was built better and they stood behind them and if i had a problem i could talk to someone who knew there systems

people got tired of being put on hold for long periods of time and then have to put up with tech support that at best spoke broken english and would fumble thru trying to troubleshoot there pc's and doing a poor job of it

I am happily *not* writing this on a Dell. However, I am writing this on a computer that I customized. I looked at the pre-configured machines and always found that something was missing that I needed.

I have not missed Dell for one minute. If I wanted to be ignored or treated like I was in the way, I'd go shopping at an international retailer known for its low prices. At least there I wouldn't be paying top dollar to be treated badly. Doesn't matter what changes Dell makes. I will never buy from them again, and there seem to be a lot of people who have the same predisposition ... and that number is growing all the time.

I agree, its sucks that that Dell is moving away from their custom PC business model. In the past I  have always like selling and buying Dells because of their ability to be customize. As a sales person their wasn't a better product to sell than Dell at the time; because of its customization abilities  I was always able to customize the PC to the customers budget, needs and use. Even tough I don't like the idea of them changing their business model I can understand their reasoning.

Derek....What a tool.  What were yoou thinking when you wrote that...Oh yea you weren't!

Seems to me Dell has lost its clout with the component suppliers  because of declining business and getting beat by Lenovo and HP. Now they ax the one thing that attracted me and a lot of other buyers to Dell in the first place?! I could see this coming though...the "custom" options were getting less and less since the days of my Dimension 400 (PII 400mhz.). e.g. only 1-2 options at most for the system components.

I think Dell could still use this build-to-order model though with its high end XPS systems (AlienWare acquisition).

I've worked in I.T. for seven years as a PC Tech/Network Admin.  I've dealt with all of the major companies like HP, IBM, Lenovo & Dell in regards to their technical support and customer service.

Simply put, Dell makes an awesome, reliable product, but their technical support ranks among the worst in the industry.  My three year old kid knows more about troubleshooting then the Muppets sitting on the other end of the phone to Dell's tech support.   I'm asked almost everyday by my co-workers and customers, "what computer should I buy," I recommend IBM or Lenovo because of their after purchase support; you'll get a sound, competent technician on the line and he or she speaks plain, clear ENGLISH.  Not some Muppet reading from a script, sitting half way around the world.

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